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Patent Protection and Threat of Litigation in Oligopoly

Carlo Capuano (), Iacopo Grassi () and Riccardo Martina ()
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Carlo Capuano: Università di Napoli Federico II
Iacopo Grassi: Università di Napoli Federico II
Riccardo Martina: Università di Napoli Federico II and CSEF, http://www.csef.it/Martina

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: In a context of imperfect patent protection, this paper analyses the strategic use of patents from a novel perspective; patents are seen as a means available to the incumbent firm to control entry and, more importantly, to influence the post-entry market interaction process effectively, by creating the conditions that favour collusion. The level of patent protection chosen by the incumbent affects the likelihood that a potential entrant will be found guilty of patent infringement. This mechanism can operate as a punishment device that eases the conditions for collusion sustainability. Therefore, in a sense, patent protection can be regarded as an instrument allowing replication of the monopoly outcome in the context of a contestable market.

Keywords: patents; patent portfolio; litigation; collusion; foreclosing; entry game (search for similar items in EconPapers)
JEL-codes: D43 K21 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth, nep-ipr, nep-law, nep-mic and nep-ore
Date: 2019-07-27
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:537

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